Development windows don’t stay open forever

Downtown Oak Park is on the verge of a mini-development boom, with 700 to 900 downtown residential rental units on the drawing board and two Lake Street buildings under contract for sale. 

Yet as the economic recovery ages, the window for attracting retail tenants — key to the viability of commercial projects and ultimately Oak Park’s economic and racial diversity — will start to close. 

Fortunately, that time is not (quite) here. The village must move quickly to capitalize on the anticipated influx of residents paying as much as $2,000 a month to live in pending developments at the Colt site, Forest and Lake, and Harlem and South Boulevard.

Those developments include more than 60,000 square feet of retail space built to modern standards, which will improve Oak Park’s ability to compete for stores producing higher tax revenue than doctors’ offices, hair salons and other service businesses exempt from sales tax.

If efforts to broaden the village’s tax base fail, residents will inevitably confront even higher property tax bills or cuts in services — or both — making Oak Park increasingly less-affordable for middle-class and lower-income residents. 

In a chicken-and-egg dilemma, Oak Park’s property tax rates are high because of the relative lack of commercial and, especially, industrial development. In turn, commercial tenants are difficult to attract because of high property tax rates. 

According to a new report by the Civic Federation, Oak Park has the third-highest effective tax rate for commercial property — 8% — among the dozen Cook County communities surveyed. Only the impoverished south suburban municipalities of Harvey and Chicago Heights had higher effective rates, which compare taxes on a property to what it would expect to fetch in a sale.

Oak Park’s effective rate was nearly double Glenview’s after increasing 40% in the decade that ended in 2012; the rise was surpassed only by Chicago’s and that of the two south suburban communities.

While national retailers do well here and are the “bell cows” that pull in other retailers, they hesitate to sign Oak Park leases because of the costs. 

“Retailers love the demographics of Oak Park and River Forest, but many see it as a pocket of uncertain depth,” says Heitman, the Chicago-based real estate investment adviser. “That leads them to question whether the positives are sufficient to offset the higher costs.” 

Heitman found that occupancy costs are $16.11 per square foot at the Shops of Downtown Oak Park (southeast corner of Harlem and Lake), compared with no more than $11.14 in River Forest and half that in LaGrange and Park Ridge.

Oak Park, in fact, shares a characteristic of the other Cook County communities in the Civic Federation survey with high effective tax rates: It lacks an industrial base to ameliorate heavy tax loads on commercial businesses and residential property owners. 

But there is a ray of hope: Oak Park’s 7.2% increase in its effective commercial property tax rate for the most recent year of the Civic Federation survey (2012) was the second-smallest, trailing only Chicago’s. 

The sprouting of residential towers catering to younger professionals gives economic development officials a chance to aggressively court retailers appropriate for that clientele and, in the process, improve Oak Park’s property values (and tax base) further. 

This strategy should not be limited to retailers: To the extent that the village can lure tech and other business start-ups, more people will have a reason to live and work here. And that will doubly benefit Oak Park.

The Business and Civic Council of Oak Park is headed by Frank Pellegrini, president; Martin Noll, treasurer; and Willis Johnson, Bill Planek, Gregory Melnyk, J. Michael Williams, and Tom Gallagher, directors.